Ty, Incorporated v. Jones Group Inc ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-2746
Ty, Inc.,
Plaintiff-Appellee,
v.
The Jones Group, Inc.,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 2057--Ian H. Levin, Magistrate Judge.
Argued December 4, 2000--Decided January 23, 2001
Before Flaum, Chief Judge, and Diane P. Wood and
Williams, Circuit Judges.
Flaum, Chief Judge. The Jones Group, Inc.
("Jones") manufactures and sells "Beanie Racers,"
which are plush toys shaped like race cars. Ty,
which sells plush toys under the name "Beanie
Babies," obtained a preliminary injunction
against Jones, forcing it to stop producing and
selling Beanie Racers. Jones asks us to reverse
the magistrate judge’s grant of a preliminary
injunction in favor of Ty on several grounds. For
the reasons stated herein, we affirm.
I. Background
Ty in 1993 began selling plush toys throughout
the United States under the name "Beanie Babies"
and has sold over a billion Beanie Babies since
the product’s inception. Dozens of newspaper and
magazine articles, television news stories, web
sites, books, and magazines have emerged
concerning Ty’s Beanie Babies, apparently making
the product a national sales phenomenon. Ty has
obtained U.S. Federal Trademark Registrations for
the marks "Beanie Babies" and "The Beanie Babies
Collection." Beanie Babies are small, plush
animals filled with plastic pellets. Generally,
they are eight to nine inches long and typically
are made from a velboa-type fabric. A red, heart-
shaped hang tag with Ty’s logo on it is attached
to each Beanie Babies product.
Jones is a licensee of NASCAR and began in 1998
manufacturing and selling Beanie Racers, which
are bean-filled replicas of NASCAR racing cars.
Attached to each Beanie Racer is a white and
rectangular shaped hang tag with the following
information on it: (1) the Beanie Racers mark;
(2) the multi-colored NASCAR mark; (3) the
signature of the driver of each NASCAR race car,
including a disclosure which recognizes the
individual or entity who owns the rights to such
signature; and (4) the corporate sponsor of each
NASCAR race car. Beanie Racers are approximately
eight inches long, are filled with plastic
pellets, and are made of velboa-type plush
fabric.
Ty sent Jones a cease and desist letter dated
July 17, 1997 informing Jones that its Beanie
Racers infringed upon Ty’s trademark rights.
Jones proceeded forward with the production of
its Beanie Racers and Ty responded by pursuing
legal action against Jones. In its suit, Ty
alleges that Jones engaged in trademark
infringement, unfair competition, and dilution in
violation of federal and state laws. On November
17, 1999, Ty requested a preliminary injunction
against Jones prohibiting Jones from selling
plush toys under the name Beanie Racers pending
the outcome of the suit. The magistrate judge
granted Ty’s motion for a preliminary injunction
in an Opinion and Order dated June 5, 2000. Jones
requested a reconsideration of the magistrate
judge’s opinion, but the magistrate judge decided
not to alter his original opinion. On July 7,
2000, the magistrate judge entered the
preliminary injunction against Jones and set a
bond in the amount of $500,000. Jones is
appealing the grant of the preliminary injunction
pursuant to an interlocutory appeal, 28 U.S.C.
sec. 1292(a)(1).
II. Discussion
A. Sliding Scale Analysis
A party seeking to obtain a preliminary
injunction must demonstrate: (1) its case has
some likelihood of success on the merits; (2)
that no adequate remedy at law exists; and (3) it
will suffer irreparable harm if the injunction is
not granted. See Abbott Labs. v. Mead Johnson &
Co., 971 F.2d 6, 11 (7th Cir. 1992). If the court
is satisfied that these three conditions have
been met, then it must consider the irreparable
harm that the nonmoving party will suffer if
preliminary relief is granted, balancing such
harm against the irreparable harm the moving
party will suffer if relief is denied. See Storck
USA, L.P. v. Farley Candy Co., 14 F.3d 311, 314
(7th Cir. 1994). Finally, the court must consider
the public interest (non-parties) in denying or
granting the injunction. Id. The court then
weighs all of these factors, "sitting as would a
chancellor in equity," when it decides whether to
grant the injunction. Abbott Labs., 971 F.2d at
12. This process involves engaging in what we
term the sliding scale approach; the more likely
the plaintiff will succeed on the merits, the
less the balance of irreparable harms need favor
the plaintiff’s position. Id. The sliding scale
approach is not mathematical in nature, rather
"it is more properly characterized as subjective
and intuitive, one which permits district courts
to weigh the competing considerations and mold
appropriate relief." Id. (internal citations and
quotation marks omitted).
We review a district court’s decision to grant
or deny a preliminary injunction under the abuse
of discretion standard. Id. A district court when
analyzing the relevant factors abuses it
discretion when it commits a clear error of fact
or an error of law. Id. at 13. We accord, absent
any clear error of fact or an error of law,
"great deference" to the district court’s
weighing of the relevant factors. Id. "[W]hile
our review is more searching than an examination
of whether the district court weighed those
factors irrationally or fancifully, we may not
substitute our judgment for that of the district
court." Id. (internal citations and quotation
marks omitted).
Jones finds fault with the manner in which the
magistrate judge weighed the relevant factors in
deciding to grant a preliminary injunction in
favor of Ty. Balancing the harms "involves a two-
step process. First the court must assess the
plaintiff’s chance of success. Next it must
balance the hardships in accordance with this
determination." Farley Candy Co., 14 F.3d at 314.
Initially, the court only needs to determine that
the plaintiff has some likelihood of success on
the merits. However, at the balancing stage, the
court must determine how great the moving party’s
likelihood of success on the merits is in order
to properly balance the potential harms. See id.at 314 n.1. Jones contends that the magistrate
judge failed to conduct a sliding scale analysis
in his June 5, 2000 Opinion and Order and that he
balanced the harms to the respective parties
before considering whether Ty had shown that it
had a likelihood of succeeding on the merits.
When the magistrate judge balanced the harms,
according to Jones, it had not yet determined how
great Ty’s likelihood of success on the merits
was; therefore, the magistrate judge improperly
balanced the harms.
Jones, in a motion for reconsideration, alerted
the magistrate judge to its belief that he had
failed in the opinion to engage in the sliding
scale approach. The magistrate judge conducted a
hearing on June 20, 2000 to address the matter
and then on July 7, 2000 issued a supplemental
order denying Jones’ motion for reconsideration.
Jones points out that the magistrate judge’s
original opinion made no mention about Ty’s
approximately 50 - 50 chance of succeeding on the
merits. Further, Jones notes that the magistrate
judge in his original opinion found, after
addressing the likelihood of confusion factors,
that Ty had "a better than negligible chance of
showing likelihood of confusion." Jones concludes
that the magistrate judge’s assertion that Ty had
about a 50 - 50 likelihood of success on the
merits is at odds with his conclusion that Ty had
a better than negligible chance of showing a
likelihood of confusion. Jones claims that the
magistrate judge failed to properly conduct a
sliding scale analysis because he balanced the
harms before assessing Ty’s likelihood of success
on the merits and the magistrate judge’s
determination of the likelihood of success on the
merits seems inconsistent with his original
opinion.
Both in a supplemental order and a hearing
conducted on June 20, 2000, the magistrate judge
indicated that he had evaluated Ty’s likelihood
of success on the merits before considering the
balancing of the harms. The magistrate judge said
in his supplemental order that "in analyzing the
issues, this Court did evaluate the Plaintiff’s
likelihood of success on the merits prior to
considering the balancing of harms. Specifically,
based on the record before it, the Court
determined that the Plaintiff had about a 50 - 50
chance of likelihood of success on the merits.
This evaluation of [the] likelihood of success
was, then, considered and applied by the Court in
its making of the balancing of harms analysis
required in the Seventh Circuit." During the June
20, 2000 hearing regarding Jones’ motion for
reconsideration, the magistrate judge stressed
that he had conducted a sliding scale analysis
and that Ty had some likelihood to succeed on the
merits:
I just want to mention that it may have been
unfortunate on my side, putting the balancing of
the harms before the likelihood of success on the
merits in terms of the format of the opinion, but
the reality of the situation is I looked at the
likelihood of success on the merits before I got
to the . . . balancing of the harm . . . . I
might not have articulated it in the opinion, but
it was quite obvious to me that they had . . . a
pretty decent chance of winning[;] . . . perhaps
up to a fifty-fifty chance of prevailing on [the]
permanent injunction. This is not a case where
there’s just a slight chance of winning.
The magistrate judge was careful to make it clear
that he did take into account Ty’s likelihood of
success on the merits before balancing the harms
and that he did consider the extent to which Ty
may succeed on the merits. In doing so, he
remarked that this is not a case where Ty had a
"slight chance of winning." This comment implies
that the magistrate judge was comfortable with
his overall determination that granting a
preliminary injunction in favor of Ty was
appropriate because Ty had a realistic chance of
succeeding on the merits. Jones has provided no
convincing evidence that the magistrate judge’s
assertions regarding this issue is somehow
incorrect. In a straightforward fashion, both
during the hearing on the matter and in his
supplemental order, the magistrate judge provided
us with his reasoning with regard to the
balancing of factors in the case. We review such
a decision with great deference and we will not
disturb a magistrate judge’s decision based upon
supposition that his analysis was improper. See
Farley Candy Co., 14 F.3d at 315 ("We will take
the court at its word that its actual comparison
was of the overall appearance of the trade
dresses; therefore there was no error of law.").
Therefore, we find no abuse of discretion with
regard to the manner in which the magistrate
judge conducted the sliding scale analysis.
B. Likelihood of Success on the Merits
Ty’s trademark infringement case against Jones
claims that Jones’ use of the name Beanie Racers
violates sec. 43(a) of the Lanham Act, 15 U.S.C.
sec. 1125(a). In order to prevail in an action
under sec. 43(a) of the Lanham Act, Ty must
establish: "(1) that it has a protectible
trademark, and (2) a likelihood of confusion as
to the origin of the defendant’s product."
International Kennel Club of Chicago, Inc. v.
Mighty Star, Inc., 846 F.2d 1079, 1084 (7th Cir.
1988) (internal citations and quotation marks
omitted). Ty need only demonstrate at the
preliminary injunction stage that it has a
"better than negligible" chance of succeeding on
the merits so that injunctive relief would be
justified. Id. (internal citations and quotation
marks omitted). Jones did not contest the
magistrate judge’s conclusion that Ty has a
protectible interest in the term "Beanie" because
it has a better than negligible chance of proving
that the mark has acquired secondary meaning. We
will therefore accept the magistrate judge’s
determination regarding Ty’s protectible interest
in the term "Beanie."
Next, we turn to whether Ty has a valid
likelihood of consumer confusion claim regarding
the origin of Jones’ product. We employ the
following factors to evaluate whether a
likelihood of confusion exists in a trademark
case: (1) the similarity of the marks in
appearance and suggestion; (2) the similarity of
the products; (3) the area and manner of
concurrent use; (4) the degree of care likely to
be used by consumers; (5) the strength of the
plaintiff’s mark; (6) whether any actual
confusion exists; and (7) the defendant’s intent
to palm off its goods as those of the plaintiffs.
See Helene Curtis Indus., Inc. v. Church & Dwight
Co., Inc., 560 F.2d 1325, 1330 (7th Cir. 1977).
The magistrate judge recognized that "[n]one of
these factors by itself is dispositive of the
likelihood of confusion question, and different
factors will weigh more heavily from case to case
depending on the particular facts and
circumstances involved." International Kennel
Club, 846 F.2d at 1087 (internal citations and
quotation marks omitted). As a consequence, the
"weight and totality of the most important
factors in each case will ultimately be
determinative of the likelihood of confusion, not
whether the majority of the factors tilt the
scale in favor of one side or the other." Schwinn
Bicycle Co. v. Ross Bicycles, Inc., 870 F.2d
1176, 1187 (7th Cir. 1989). Even though no one
factor is decisive, the similarity of the marks,
the intent of the defendant, and evidence of
actual confusion are the "most important factors"
in a likelihood of confusion case. G. Heileman
Brewing Co., Inc. v. Anheuser-Busch, Inc., 873
F.2d 985, 999 (7th Cir. 1989); see also Eli Lilly
& Co. v. Natural Answers, Inc., 233 F.3d 456, 462
(7th Cir. 2000). The magistrate judge’s findings
with regard to likelihood of confusion are
findings of fact and are subject to a clearly
erroneous standard of review. See Eli Lilly, 233
F.3d at 462.
Jones argues that the magistrate judge abused
his discretion when he found that there was a
likelihood of confusion between the Ty and Jones
marks and therefore Ty had about a 50 - 50 chance
of likelihood of success on the merits. With
regard to four of the factors--that is,
consumers’ degree of care, strength of marks,
actual confusion, and intent to palm off
plaintiff’s goods--the magistrate judge found in
favor of Jones. Ty is not contesting the
magistrate judge’s conclusions with regard to
these factors and so we need not address them. As
an initial matter, Jones claims that the
magistrate judge did not even find that the most
important factors, including similarity of the
marks, the intent of the defendant, and evidence
of actual confusion favored Ty. In fact, he only
found that the similarity of the marks favored
Ty, which according to Jones, reveals that Ty’s
case for likelihood of confusion is not
exceptionally strong.
1. Similarity of the Marks
The magistrate judge determined that there was
a better than negligible chance that consumers
would view the Beanie Racers mark as similar and
source identifying with Ty’s "Beanie" mark. Jones
asserts that the magistrate judge erred when he
said that the "mark in issue is the ’Beanie’
mark." According to Jones, the proper point of
comparison is how a consumer would view the
marks. The Jones mark is Beanie Racers and so the
appropriate comparison would be between "Beanie
Racers" and "Beanie Babies" and not just the word
"Beanie." Jones would like us to find that the
magistrate judge’s emphasis upon the term
"Beanie" is inappropriate. This is difficult to
do considering Jones has not appealed the
magistrate judge’s conclusion that Ty has a
better than negligible chance of showing that the
"Beanie" mark is entitled to protection.
Therefore, it seems proper that the magistrate
judge would focus upon the mark entitled to
protection--that is, the "Beanie" mark--when
comparing the two products. As the magistrate
judge noted, this Circuit adheres to the rule
that "if one word or feature of a composite
trademark is the salient portion of the mark, it
may be given greater weight than the surrounding
elements." Henri’s Food Prods. Co., Inc. v.
Kraft, Inc., 717 F.2d 352, 356 (7th Cir. 1983).
It is "inappropriate to focus on minor stylistic
differences to determine if confusion is likely"
if the public does not encounter the two marks
together. Meridian Mut. Ins. Co. v. Meridian Ins.
Group, Inc., 128 F.3d 1111, 1115 (7th Cir. 1997).
When attempting to determine if two marks are
similar, the comparison should be made "’in light
of what happens in the marketplace,’ [and] not
merely by looking at the two marks side-by-side."
Id. (quoting James Burrough Ltd. v. Sign of
Beefeater, Inc., 540 F.2d 266, 275 (7th Cir.
1976)). With this in mind, we must remember that
Beanie Racers and Beanie Babies when placed side-
by-side do have distinctive hang tags that make
them seem dissimilar. However, one presumes that
in the marketplace consumers are not placing the
plush toys side-by-side and noting that the
Beanie Racers hang tag is rectangular and white
and that Ty’s is red and heart-shaped. It is also
unlikely that consumers are necessarily noticing
that most Beanie Baby hang tags do not have the
word "Beanie Baby" on the front of the hang tag;
however, they do all have the mark "The Beanie
Babies Collection" on the inside of the hang
tag./1 The word "Beanie" is a well-known and
famous part of the Ty mark, rendering it the more
salient portion of the mark and therefore
deserving greater weight than the surrounding
elements.
Jones argues that the surrounding marks, like
the NASCAR mark, the corporate sponsor mark, and
the signature of the driver, on its hang tag
reduces the likelihood of confusion between its
mark and Ty’s; this is not necessarily a strong
argument. As we have already stated, the term
"Beanie" is salient and reduces the importance of
the surrounding elements. The additional marks on
the Beanie Racers may not reduce the likelihood
of confusion among consumers because they still
may believe that Ty licensed, approved, or
authorized Jones’ production of the Beanie
Racers. See International Kennel Club, 846 at
1088. Ty did license the Beanie Babies mark for
use in McDonald’s promotions in 1997, 1998, and
1999 under the name "Teenie Beanie Babies." Ty
also produces "Beanie Buddies" and "Beanie Kids"
toys. Consumers very well may think that Ty
licensed or sponsored the Beanie Racers as part
of Ty’s line of "Beanie" products. The "Beanie"
mark does seem to be the common thread among all
of Ty’s "Beanie" products, suggesting the mark is
distinctive, and Ty markets its products relying
on the public’s recognition of this term. There
is no indication that the magistrate judge made
any clear error regarding his findings on this
issue. Based on the evidence presented to him, he
found that the "Beanie" mark was a salient aspect
of Ty’s product, and under our deferential
standard of review, we will not disturb his
conclusion.
2. Similarity of the Products
The magistrate judge determined that the
similarity of the products slightly favored Ty as
well. In assessing whether products are similar,
the question is "whether the products are the
kind the public attributes to a single source."
McGraw-Edison Co. v. Walt Disney Prods., 787 F.2d
1163, 1169 (7th Cir. 1986) (internal citations
and quotation marks omitted). The magistrate
judge commented that it was important that Jones’
advertisements for its Beanie Racers "highlight
the similarities between the two products" by
stating that Beanie Racers "are constructed from
plush fabric like Beanie Babies." Jones in its
motion for reconsideration brought to the
magistrate judge’s attention that third-parties
created these advertisements and not Jones.
Although the magistrate judge may have presumed
the advertisements were created by Jones, this
assumption on the magistrate judge’s part does
not affect his reasoning. He found that the
"similarity of the products slightly favors [the]
Plaintiff in light of the fact that they are both
small stuffed objects and that [the] Defendant
compares its product to that of the Plaintiff in
its own advertisements." In the magistrate
judge’s opinion, it is important that the objects
are similar in that they are small stuffed
objects that are soft, pellet-filled, eight to
nine inch plush toys made from velboa-type
fabric. When considering whether products are
closely related for the purpose of likelihood of
confusion, "[a] closely related product is one
which would reasonably be thought by the buying
public to come from the same source, or thought
to be affiliated with, connected with, or
sponsored by, the trademark owner." Sands, Taylor
& Wood Co. v. Quaker Oats Co., 978 F.2d 947, 958
(7th Cir. 1992) (internal citations and quotation
marks omitted). The similarity between Beanie
Babies and Beanie Racers in that they are small
stuffed objects can be important because the
public may presume that Ty is somehow affiliated
with the Beanie Racers product. Furthermore, even
if Jones did not create the advertisements
comparing Beanie Racers and Beanie Babies, the
advertisements could cause the public to believe
that Beanie Racers come from the same source as
Beanie Babies. We are concerned in this instance
with the public’s perception of who created the
product and therefore whether Jones or one of
Jones’ buyers sponsored the advertisement is not
critical. See McGraw-Edison Co., 787 F.2d at 1169("the district court apparently ignored the
question of whether the purchasing public might
believe a single source could produce both
electronic fuses (manufactured by McGraw-Edison)
and video games and telephones (licensed by
Disney)"). This is also why whether Ty employees
recognize the difference between the two products
is not crucial as Jones suggests because what is
important is whether customers or potential
customers would be confused. Although the
magistrate judge incorrectly attributed the
advertisements to Jones, the remaining facts
support the magistrate judge’s findings that the
products are similar. The advertisements, whether
created by Jones or third-parties, seem to create
the impression that Beanie Racers are affiliated
or associated with Ty. The magistrate judge’s
findings on this matter are not unsupported and
therefore we will not dislodge his determination
in this regard.
3. Area and Manner of Concurrent Use
When considering the area and manner of
concurrent use factor, we have to assess whether
"there is a relationship in use, promotion,
distribution, or sales between the goods or
services of the parties." Forum Corp. of N. Am.
v. Forum, Ltd., 903 F.2d 434, 442 (7th Cir.
1990). In determining whether the area and manner
of concurrent use as between two marks is likely
to cause confusion, the magistrate noted that
several factors can be important: (1) the
relative geographical distribution areas, see
Rust Env’t & Infrastructure, Inc. v. Teunissen,
131 F.3d 1210, 1217 (7th Cir. 1997); (2) whether
there exists evidence of direct competition
between the products, see Smith Fiberglass
Prods., Inc. v. Ameron, Inc., 7 F.3d 1327, 1330
(7th Cir. 1993); (3) whether the products are
sold to consumers in the same type of store, see
Vitarroz Corp. v. Borden, Inc., 644 F.2d 960, 967
(2nd Cir. 1981); (4) whether the products are
sold in the similar section of a particular
store, see id.; and (5) whether the product is
sold through the same marketing channels, see
Nike, Inc. v. "Just Did It" Enters., 6 F.3d 1225,
1230 (7th Cir. 1993).
The magistrate judge concluded that the manner
and concurrent use of the "Beanie" mark and
Jones’ "Beanie Racers" mark created a better than
negligible chance of a likelihood of confusion.
The magistrate judge stated that "[b]oth products
are sold only to speciality retailers, and are
most likely sold in the same section(s) of such
stores. In addition, both products are produced
in limited numbers and periodically [are] retired
in order to achieve a collectible status.
Finally, both Beanie Babies and Beanie Racers are
featured in the same or similar magazines." Jones
in its motion for reconsideration pointed out
that Beanie Racers are not just sold to
speciality stores. As it turns out, Beanie Racers
are sold to mass market retailers, like Kroger,
Walgreens Drugs, Save A Lots, and J.C. Penney,
which is Jones’ largest customer. Since J.C.
Penney is not a speciality store, it is not an
authorized Ty seller. This misstatement on the
part of the magistrate judge does not fatally
weaken the implication of his comment. Even
though Jones sells Beanie Racers to mass market
retailers, this does not negate that Beanie
Racers are sold to speciality stores and Ty also
sells its Beanie Babies exclusively to speciality
gift stores. One of the biggest customers for
both Beanie Racers and Beanie Babies is Cracker
Barrel. Beanie Racers were sold on the same web
sites as those that sell Ty products as well. The
magistrate judge did not err when he determined
that Beanie Babies and Beanie Racers are sold in
the same store--that is, speciality stores--and
even possibly in the same section of those
stores.
The magistrate judge also concluded that the
fact that Beanie Racers and Beanie Babies are
featured in the same or similar magazines shows
that they are sold using the same means of
advertising. This proposition would still hold
true even if, as Jones contends, Beanie Racers
were advertised mainly in racing magazines.
Nonetheless, Beanie Racers were still advertised
in the same magazines as Beanie Babies, such as
Mary Beth’s Bean Bag World and Hot Toys
magazines, revealing a somewhat similar
advertising approach on the part of both
entities. Because both products are sold in the
same stores and advertised in some of the same
magazines, this also indicates that the products
to some extent are in direct competition. In
fact, Ty claims that it is possible that the two
companies directly compete with each other in
terms of their target audience. Jones denies this
based on the fact that Ty Warner, owner of Ty,
Inc., said in a deposition in Imperial Toy Corp.
v. Ty, Inc., No. 97 C 8895, 1998 WL 601875 (N.D.
Ill. Sept. 09, 1998) that the largest niche for
Beanie Babies was girls between the ages of five
and fourteen, whereas there is no evidence Beanie
Racers are being sold primarily to girls between
the ages of five and fourteen. Ty claims that Ty
Warner said Ty’s market runs "the whole gamut"
and noted that he thought the largest niche was
girls five to fourteen. One of Jones’ own
principals, according to Ty, Greg Jones, said,
"Beanie Racers have a tremendous appeal to the 40
percent of the NASCAR fan base that has been
largely overlooked for years, namely women and
children." Based on the evidence presented, it
seems undeniable that Beanie Racers and Beanie
Babies were sold and advertised in the same
venues and there exists the possibility that the
two companies targeted similar buyers. Taken
together as a whole, we cannot conclude that the
magistrate judge erred in finding Ty has a better
than negligible chance of showing a likelihood of
confusion based upon the manner and concurrent
use of the "Beanie" mark and Jones’ production of
Beanie Racers.
4. The Most Important Factors Issue
In this case, the magistrate judge determined
that the similarity of the marks, the similarity
of the products, and the area and manner of
concurrent use constitute the three most critical
factors in assessing whether there exists a
likelihood of confusion. He acknowledged that
some of the likelihood of confusion factors
weighed in Ty’s favor and others weighed in
Jones’ favor. Nevertheless, he concluded that the
"Plaintiff has, at bottom, a better than
negligible chance of showing likelihood of
confusion." We see no reason to disturb the
magistrate judge’s conclusion. While it is true
that he found that only one of the most important
factors--that is, the similarity of the marks--
favored Ty, this does not diminish his overall
determination. See Eli Lilly, 233 F.3d at 462(stating the three most important factors one
should look to in a likelihood of confusion
case). We allow the magistrate judge the
flexibility to determine what factors are most
critical in a case, and in this instance, the
"Beanie" mark was at the heart of the
disagreement between Jones and Ty. We can find no
abuse of discretion in the magistrate judge’s
particular emphasis on certain factors that
favored Ty. There is no hard and fast requirement
that all three of the most significant factors
must weigh in a plaintiff’s favor for that
particular party to prevail in attaining a
preliminary injunction. The magistrate judge
determined that Ty had both a protectible
interest in the "Beanie" mark and that there was
a likelihood of confusion as to the origin of the
Beanie Racers product; thus, he concluded Ty had
about a 50 - 50 chance of likelihood of success
on the merits. We detect no clear error in the
magistrate judge’s analysis of the facts and
therefore we affirm the magistrate judge’s
decision to find that Ty had some likelihood of
succeeding on the merits.
C. Balancing of the Harms
Jones challenges the manner in which the
magistrate judge balanced the respective
irreparable harms that may result to each party
if an injunction is granted or denied. We review
a court’s balancing of the preliminary injunction
factors for an abuse of discretion. TMT N. Am.,
Inc. v. Magic Touch, GmbH, 124 F.3d 876, 881 (7th
Cir. 1997). A court when weighing the interests
of the private parties and the public interest
should try to "minimize the costs of being
mistaken." Abbott Labs., 971 F.2d at 12 (internal
citations and quotation marks omitted). The costs
in this case could run high considering the
possible practical harms that may flow from the
grant of a preliminary injunction in favor of Ty.
Jones notes that even if one were to assume that
Ty had about a 50 - 50 chance of succeeding on
the merits, Ty had to show that it would suffer
more harm from the denial of an injunction than
Jones would suffer from an entry of an
injunction. Jones argues that by granting an
injunction, the magistrate judge effectively
ended the parties’ dispute and allowed Ty to seek
the relief it desired without undergoing a trial
on the merits. If Jones desires to continue
selling its product, it could decide to rename
the product, which would involve changing the
hang tags, displays, promotional materials, and
the NASCAR license agreement. Alternatively,
Jones could refrain from selling Beanie Racers
all together. Either option is burdensome and a
change in name will most likely result in a loss
of goodwill because consumers since 1998 have
known the product as Beanie Racers. There is also
the possibility that it would be difficult for
Jones to change the name of its product back to
Beanie Racers if it were to prevail in a later
litigation. Therefore, Jones contends if it were
not forced to go out of business, "at the very
least [Jones] would face the Hobson’s choice of
designing and producing still another new package
or taking its product off the market until a
decision on the merits might be had." Farley
Candy Co., 14 F.3d at 315. Additionally,
according to Jones, the possibility exists that
the injunction would actually cause Jones to go
out of business, whereas Ty’s irreparable harm
must have been less compelling considering it
waited almost eight months to move for a
preliminary injunction. For all of these reasons,
Jones advances that the harm in granting an
injunction would be more burdensome on its
business than denying Ty the right to a
preliminary injunction.
The magistrate judge determined that the harm
to Ty would be more significant if a preliminary
injunction was not granted. Initially, the
magistrate judge acknowledged that there is no
way to measure Ty’s remedy at law since "damages
occasioned by trademark infringement are by their
very nature irreparable." International Kennel
Club, 846 F.2d at 1092 (internal citations and
quotation marks omitted). These type of injuries
are presumed to be irreparable because "it is
virtually impossible to ascertain the precise
economic consequences of intangible harms, such
as damage to reputation and loss of goodwill,
caused by such violations." Abbott Labs., 971
F.2d at 16. In considering Jones’ argument that
the eight month delay on Ty’s part in pursuing
the preliminary injunction shows that it did not
face a threat of irreparable injury, the
magistrate judge conceded that Ty may have
delayed in bringing its motion for a preliminary
injunction, but he stated that "it cannot be said
that this minimal delay lulled Defendant into a
false sense of security, nor that the delay was
unreasonable." Delay in pursuing a preliminary
injunction may raise questions regarding the
plaintiff’s claim that he or she will face
irreparable harm if a preliminary injunction is
not entered. See Ideal Indus., Inc. v. Gardner
Bender, Inc., 612 F.2d 1018, 1025 (7th Cir.
1979). Whether the defendant has been "lulled
into a false sense of security or had acted in
reliance on the plaintiff’s delay" influences
whether we will find that a plaintiff’s decision
to delay in moving for a preliminary injunction
is acceptable or not. Id. Jones has not presented
any affirmative evidence that Ty’s delay in
seeking a preliminary injunction caused Jones to
be lulled into a false sense of security or that
Jones in any way relied on Ty’s delay. The
magistrate judge therefore properly decided that
the evidence of mere delay alone, without any
explanation on Jones’ part of why such a delay
negatively affected them, would not lessen Ty’s
claim of irreparable injury.
What appears to drive the magistrate judge to
find that the balance of the harms favors Ty is
Jones’ knowledge of Ty’s trademarks prior to
adopting its Beanie Racers mark. Jones has
posited several economic burdens it will face if
an injunction is granted; however, Jones’
position, according to the magistrate judge, is
less than convincing in light of the fact that
the "Defendant conceded that it had full
knowledge of Plaintiff’s trademarks prior to
adopting its mark. In assessing Defendant’s
irreparable harm, the court excludes the burden
it voluntarily assumed by proceeding in the face
of a known risk." Jones argues that it consulted
extensively with legal counsel to establish
intellectual property rights, marks, and
agreements prior to selling or manufacturing its
Beanie Racers product, but these actions do not
lessen the fact that it had knowledge of Ty’s
product and the possible confusion that could be
created between Beanie Racers and Beanie Babies.
"One entering a field already occupied by another
has a duty to select a trademark that will avoid
confusion." Ideal Indus., 612 F.2d at 1026. After
all, both products use the same salient term--
that is, "Beanie." Jones was forewarned of the
possibility that Ty would sue considering Ty sent
Jones a cease and desist letter. Jones went ahead
with its production of the Beanie Racers, despite
such a warning, knowing full well it may face
legal challenges to its product and in turn
negative financial consequences. Jones "[h]aving
adopted its course . . . cannot now complain that
having to mend its ways will be too expensive."
Id. The magistrate judge acknowledged with
respect to Jones’ concern that it might be driven
out of business because of the preliminary
injunction that "I have seen no evidence in the
case . . . that this [injunction] would . . . put
them out of business . . . . I certainly would
not want to put anybody . . . out of business,
but I have not seen anything that would indicate
that this [action] is . . . unjust." Jones’ claim
of irreparable harm rings hollow considering when
it decided to produce the Beanie Racers it had
knowledge of the potential consequences. In
contrast, Ty, according to the magistrate judge,
"stands to suffer significantly if a preliminary
injunction is not entered, as Plaintiff could
lose control of its reputation and goodwill.
Plaintiff would risk losing years of nurturing
its business."
The magistrate judge was careful not to leave
Jones in a totally vulnerable position before a
hearing on the merits. He provided for a bond of
$500,000, which he believed would adequately
compensate Jones for any harm that may result
from the preliminary injunction. As we have
previously noted, the magistrate judge found Ty’s
likelihood of success on the merits was not
slight and accordingly there was no need for Ty
to make a proportionately stronger showing that
the balance of the harms was in its favor. See
Farley Candy Co., 14 F.3d at 315 ("Once the
district court determined that Storck’s
likelihood of success on the merits of its claim
was slight, it required Storck to make a
proportionately stronger showing that the balance
of harms was in its favor. Accord Abbott
Laboratories, 971 F.2d at 12."). Based upon the
magistrate judge’s balancing of the harms, we
find that he did not abuse his discretion when he
found the harms facing Jones if a preliminary
injunction was granted did not outweigh the harms
facing Ty if such an injunction was not granted.
III. Conclusion
The magistrate judge assessed the various
relevant factors when considering Ty’s request
for a preliminary injunction against Jones and we
conclude that the magistrate judge did not abuse
his discretion when he granted said injunction in
favor of Ty. Therefore, we Affirm the magistrate
judge’s decision.
/1 During oral arguments, Ty acknowledged that only
for a certain period of time did the Ty hang tag
have the word "Beanie Baby" on the front of the
hang tag. However, Ty also noted that the term
"Beanie Babies" is located inside the hang tag of
all of the Beanie Babies. Therefore, Jones is
incorrect in alleging that the term "Beanie
Babies" does not appear on the hang tag at all.